Lloyd's Maritime and Commercial Law Quarterly
INTERPRETATION OF INDUSTRY-STANDARD CONTRACTS
Aaron Taylor*
Standard-form contracts are at the heart of modern commerce, but are seldom given specific consideration in the literature on contractual interpretation. This paper considers the extent to which the general ICS principles of interpretation are applicable in this context. A central concern in interpreting standard forms is promoting commercial certainty. The court is not solely concerned with establishing the "intention" of the parties or of the contract drafter, but should aim to engage in a dialogue with the contract-issuing body, in which market expectation and commercial sense play an especially important role. Most importantly, since a decision on interpretation has the potential adversely to affect third parties with ongoing contracts on materially identical terms, it is submitted that the court should decline to "manipulate" standard forms by interpreting them to suit the circumstances of the parties before it. Instead, rectification is the appropriate response to the parties’ subjective mistake in adopting a standard provision. Rectification would apply only to the particular contract before the court, leaving to the contract-issuing body the decision whether any amendment is required to the standard form itself.
“The contract […] conforms to customary mercantile practice at least in the regrettably normal respects: first, that it is legible only by eyes with an acuity unlikely to be enjoyed by any individual possessing sufficient maturity of mind to understand it; secondly, that it is verbose, tautologous and obscure; thirdly, that by internal evidence, it has not been constructed, but merely thrown together as an amalgam of phrases, recklessly as well as fortuitously culled, with scant regard, it may be, for copyright, from other sets of trading conditions.”†
* Teaching Fellow, University College London; Tutor in Law, St Edmund’s College, Cambridge. I am extremely grateful to Professor Edwin Peel for supervising the BCL dissertation on which this article is based. This paper was presented at a UCL Faculty of Laws Staff Research Seminar in January 2017. I am grateful to those who attended that seminar for their insights, and to Michael Taylor for his comments on a draft of the article. The usual disclaimer applies.
† Derby Cables Ltd v Frederick Oldridge Ltd [1959] 2 Lloyd’s Rep 140, 149, per Winn I.
The following abbreviations are used:
Calnan: R Calnan, Principles of Contractual Interpretation (Oxford University Press, Oxford, 2013);
Carter: J Carter, The Construction of Commercial Contracts (Hart, Oxford, 2013);
Chitty: H Beale (Ed.), Chitty on Contracts, 32nd edn (Sweet and Maxwell, London, 2015);
Contract Terms: A Burrows and E Peel (Eds), Contract Terms (Oxford University Press, Oxford, 2007);
CMLJ: Capital Markets Law Journal;
Hudson: Atkin Chambers (Ed.), Hudson’s Building and Engineering Contracts, 13th edn (Sweet and Maxwell, London, 2014);
JIBLR: Journal of International Banking Law and Regulation;
JIBFL: Journal of International Banking and Financial Law;
Keating: V Ramsey and S Furst (Eds), Keating on Construction Contracts, 10th edn (Sweet & Maxwell, London, 2016);
Lewison: K Lewison, The Interpretation of Contracts, 6th edn (Sweet & Maxwell, 2015);
McMeel: G McMeel, The Construction of Contracts: Interpretation, Implication and Rectification, 2nd edn (Oxford University Press, Oxford, 2011);
Scrutton: B Eder et al (Eds), Scrutton on Charterparties and Bills of Lading, 23rd edn (Sweet & Maxwell, London, 2015);
Treitel: E Peel (Ed.), Treitel on the Law of Contract, 15th edn (Sweet & Maxwell, London, 2015);
Wilmot-Smith: R Wilmot-Smith (Ed.), Wilmot-Smith on Construction Contracts, 3rd edn (Oxford University Press, Oxford, 2013);
Worthington: S Worthington (Ed.), Commercial Law and Commercial Practice (Hart, Oxford, 2003).
262